First Rental Property (Kingsessing)

[William Simon]

Hi Everyone,

I am new to the Philadelphia area, however, am looking to get into the lower end renting sector of the city. I have a good network of two investors one with around 10 properties in lower end parts of Philly another with 6 in the Spring Garden area who are happy to help me along.

A little about me, I am twenty years old, and while I realize some of you may be thinking where on earth is this kid going to get the capital to purchase a house or even finance one, I am fortunate enough to have started a business that has taken off and I am looking to invest my money! (If this is a bad idea someone tell me now - before you ask yes I max my Roth IRA every year)

Without getting into details I have come up with a max down payment of 10K dollars and I would like that to be 20% of a 50K house. I think this is a good place to start.

I found a single-family home in Kingsessing and I was hoping one of you (or many of you) could chime in to make sure I am calculating everything correctly, and ultimately help make my decision to move forward or not.

Details:

Asking Price - 55,000 (The asking price is based on the house being three bedrooms, however, there are only two)

Zestimate - 48,167

Bid - 44,000

2 Bedrooms

1 Bathroom

870 Square Feet

Rentometer - 900/mo

Local Comparable Rentals - 950/mo

As far as the house goes, all it needs is some new flooring on the second floor (400 sqft) and a new forced hot air heater. I estimated these two things will run me at most 1.5 thousand dollars. Including my 1K transfer tax, 500 dollar closing cost, I would be at about 13,000 in initial upfront cost including my down payment.

I am confident that I could get the price of the house to the 44,000 dollar range making my monthly expenses the following:

Mortage - 200

Property Manager - 56

Water - 80 (Max)

Taxes - 70 

Insurance - 80 (Max)

Repairs - 50 (If any at all)

Total - 536

Rent (Low End) - 800

High End - 950

Meaning at the least, my cash flow will be 264/mo and that is with all of the above being extreme.

So, after I run through all the details I think overall this is a great place to start. I know the neighboorhood is not great by any means, but I think as far as getting some cash flow, and a place to start learning I believe it's a good place to start. Any comments or concerns are much appreciated, as I mentioned before I am only twenty so I am sure most of you if not all of you have far more experience. 

-William